The workshops of the world
Fifteen years ago, experts talked of nothing else but virtual economy and workerless firms. Who dared imagine a country that would cut large slices of Western markets by mass manufacturing everyday objects churned out by crowds of over-exploited manual workers ? It's absurd to emphasise the ascent of China and maintain that the only viable capitalism now would be a "real" domination one, supposedly based on relative surplus-value, the inessentiality of labour, and minimal State intervention in the economy.
In fact, at the exact time the West and Japan are busy dismantling (but not replacing) Fordism, they are faced with the breakthrough of a pre-Fordist giant: that breakthrough by no means solves their crisis, it just makes it more complex.
Up to now, no industrial power has emerged without developing its domestic market. An excessive dependence on exports makes a country vulnerable to competition from new comers, and to a possible commercial or financial crisis in the buyers' country. With a population of 1,3 billion, China does not need one billion consumers, but a couple of hundred million aren't enough. A rapidly developing China also develops its imbalances, with less capacities to face them than Japan in the 20th century. Overinvestment, overaccumulation, overproduction are every capitalist country's lot, and indeed a sign of success. But the predicament is far less manageable in the case of a colossus that depends so much on exports and neglects most of its inhabitants. Neither Holland, England, France or Germany brutally impoverished half of the rural masses. A "dual" society is possible, in Brazil for example, but that country, in spite of being an economic Goliath, won't be a world power before long, because its size does not shelter it from regional or worldwide financial or commercial shocks.
The (far from generous) Maoist social security was granted by huge state firms: their bankruptcy, breaking up or privatisation force Chinese to spend as much as several months' income on hospital admission or university fees. In theory, between 100 and 200 million people (a figure similar to that of migrant workers who own nothing but themselves) have enough purchasing power for modern consumption: but the nest-egg they have to put aside for their children or for an emergency is diverted from consuming or productive investment. Every year, millions of made in China cars remain unsold, many vehicles are bought by companies or by the State, and lots of articles are sold below production cost. Overaccumulation in durable goods entails State-assisted dumping, paid for by taxes on the rest of the economy, especially on the peasantry,- but can a fiscal policy get much from those who have little ?
Owing to demographic pressure, job losses, particularly in the mammoth public sector, and to a massive drift from the land, a Chinese yearly growth of 10% creates only about 10 million jobs, which is half the number necessary to supply the available labour force with work. Besides, as is well known, this is achieved through extendable working hours, a yearly death toll of 100.000 due to occupational hazards, and wages usually far below the minimum required for mass consumption. These conditions are necessary because export-based growth needs low manufacturing costs. As Chinese workers (like those of Taiwan and South Korea thirty years ago) start organising and press for pay rises (some factories have had to raise wages by 10 to 20% in the past couple of years), investors begin to have second thoughts. Mainland China has taken over from other Asian countries in the supply of cheap labour: if wages get higher, subcontracting will move back from Peking to Hanoi or Dacca. Some foreign investors are already complaining about the modest reforms recently implemented by the Chinese government.
True, the Chinese worker earns and spends more in 2007 than in 1977, but definitely less than is needed for a domestic market to prosper. In Mao's time, the wage packet only served as a means to cheaply renew a labour force that was exploited first for the upkeep of the bureaucracy and the build- up of State power. Restricting consumption was indeed a condition of the system, but hindered the transition to a further stage. The State can only pretend to be the sole producer and buyer in an
economy that gives absolute priority to capital goods. Today, the more active the market is, the more the wage must contribute to an equilibrium very different from that of bureaucratic capitalism. Commodities aren't things just manufactured and put in a warehouse: they only exist if their value is realised by an encounter between sellers and buyers, in a social space that can be partly controlled but not endlessly manipulated by central power. A system where the main buyers are Western consumers and a local "middle class" which is bound to remain a small minority of the population, is not sustainable. As we said before, capitalism is not synonymous with consumer society. But what functioned somehow or other in Russia, 1950, or China, 1980, fragilises an economy that's been opened up to the world. The overexploited peasant of 1977 lived in bureaucratic serfdom with little income and little to buy. The Chinese peasant of 2007 often depends on the wage of a relative who's left the village for a town job: if that worker loses his job, it means the loss of two incomes.
Consumption is a social act, which implies a whole environment. With a population sixteen times larger, India manufactures as many cars as France. That potential market is not only hindered by poor wages, but also by the inadequacy of a road network that liberal governments have neither the will nor the money to modernise.
It's not impossible for Asia to develop a mass consumption that started from the top, as usual. In 19th century Europe, and later in the US in a more spectacular way, the domestic market was first boosted by the bourgeois, then the petit-bourgeois and the best paid workers, then by the bulk of the working class, as is shown by the spread of the bicycle, of the motorcar, of household goods, and lately of digital communication objects. But can China achieve in one or two decades and for, say, half a billion people what for example Japan did in a century ? Among other things, Japan took care to handle its peasants with caution, and long subsidised them. In France and Germany too, the drift from the land was checked, and half of the European budget still goes to agricultural subsidies.
In our comments on the limits of exportism (Whither the world ?,2002), we doubted the possibility of manufacturing in Manila or Djakarta a low-cost car that would meet "modern" standards and sell in Brussels with a profit. The arrival of Chinese cars in the West might soon appear to contradict our statement. But it's not the Philippines or Indonesia that will compete with France or Germany: it's a country with a sturdy industrial infrastructure and a strong State, and, unlike T-shirts, Asian vehicles won't be a lot cheaper in Europe than Western vehicles. Besides, the low-cost car that's come on the French market (the Logan) is made in Rumania, but by a subcontractor of Renault, not by a genuine Rumanian firm. In any case, the number of Chinese cars sold overseas will not compensate for the weakness of the Chinese domestic market.
Although it's still kept under control, the expansion of China is as untenable in the long run as any growth based on export. Unlike the Russian "garrison State" that managed to last for seventy years because it was protected from the interference of the world market, China has cast in its lot with an international capital-labour relationship which is beyond its reach. For China as well as for all other contestants, globalisation works only as long as the elements that insert it in that global structure remain positive for China. Three Chinese banks may well rank among the ten biggest banks in the world, but the huge sums involved reflect the situation of a country that's condemned to continued growth: in the US-Chinese duet, it's difficult to say which is the more vulnerable of the two.
A major Chinese asset is exactly what Western public opinion moans about: a dictatorship, which is the only regime able to provide present growth with its indispensable self-control. A democratic China would unleash bourgeois tendencies to capitalist illimitation, break the fetters which now still restrain competition, and increase social tensions now repressed by the heavy hand of bureaucrats who had to admit the existence of over 70.000 riots in 2005.
